More money equals more problems...if you aren't prepared for it.
When I first got involved with a local cleaning company in 2011, we had one goal: growth. As a partial owner in the mom and pop business, I approached the company with the type of perspective that only comes with a unique combination of business ignorance and marketing experience.
Years of experience as a digital marketer taught me one thing: without sales, there is no business, and without marketing, there are no sales. Following the same logic I repeated endlessly to clients (never cut your marketing, always look to increase sales), I launched an ambitious advertising program.
Suffice to say, it “worked.” In November 2011, annualized sales were $440,000. By May 2012, annualized sales were on pace to reach $860,000. It was an initial triumph, and after we were done celebrating our apparent “success,” we sat back and took a deeper dive into the numbers and the business.
That’s when our hearts sank: despite increasing monthly revenues by more than $35,000, our profit had barely improved. In fact, the further we dove, the worse it got.
You Need to be Ready for Growth
Unfettered growth, without proper direction or guidance, can end in disaster. Growing by $420,000 in annualized revenue in six months sounds like a great thing, but considering that we were ill-equipped to properly address that growth, it nearly destroyed the company in the process.
The lessons I learned from that experience have stayed with me ever since. Whether working in a large corporate setting, smaller one man shop, or on my own as a freelance digital marketer, I’ve never forgotten the cost of unplanned growth.
When we first launched our ad campaign — which was a combination of a new website, pay-per-click marketing, a local website sponsorship and SEO — the resulting flood of leads that came in was initially a boon.
We filled our cleaning schedules and had to hire more cleaners. At first, this was a good thing. However, quality control problems (a result of hiring 11 new staff in 6 months for a company now totalling 22 people), training problems (for the same reasons) and internal administrative problems wound up undoing all the good work we had done selling.
How many businesses inadvertently set themselves up for failure despite the illusion of success? Us, for starters, and we definitely weren’t alone.
5 Things to Think About Before Growing
In the years since I’ve had the tremendous benefit of working for and with talented entrepreneurs that have considerably more experience than I. Trudi Charest, co-founder of 4ECPs, is one such person that fits that description. Her company has grown tremendously over the last year without damaging the quality or service level of her products.
I sat down with Trudi last week and asked her a single question: “how did you handle all this growth?” and received a simple but telling reply: “we planned for it.”
Her reply was powerful because, in 2011 when I launched the ad campaign for my cleaning company, the idea of planning for growth didn’t occur to myself or my partners. We — myself and my two partners — just knew that we needed to grow no matter the cost.
Today, with more experience and (what I’d like to consider) a better perspective, there are a few questions I ask myself when looking at my company revenue targets.
Question One: What Is Our Growth Plan?
Creating a plan for growth may seem obvious to you, but for many (including a younger and more impulsive version of myself), the concept of creating a growth plan is foreign.
If you’ve never made one before, a growth plan essentially addresses a few key components of your business:
- What product or service offering is our most profitable?
- Who is our target customer and how can we reach them?
- What level of growth can our current processes and assets handle?
Taking some time to massage your growth plan may prevent you from being crushed beneath the weight of new sales and customers (and everything that comes with them).
Question Two: How Will Growth Affect Staffing Requirements?
Before we set out to grow our cleaning company, we had 3.5 cleaning teams (three full time, one part time) that consisted of two cleaners each. To compliment our cleaning teams, we had a single trainer who also doubled as a quality-control supervisor.
When the leads began pouring in and our customer list expanded, we quickly had to hire six more cleaning staff. We anticipated this and were prepared for it.
What we weren’t prepared for was the support requirements that came with a significant increase in customers and new staff: we had to hire an additional trainer, an office admin and a field supervisor. Our company, which was 11 people in November 2011, was 22 people by May 2012.
Because we hadn’t properly planned for the level of growth we experienced, we did not have our administrative or training processes to the point where they were able to sustain the growth. Subsequently, our profit margin tumbled and the level of customer and staff complaints skyrocketed. This is an excellent segway to the next question...
Question Three: How Will Growth Affect Operations & Processes?
It’s often said that your business won’t grow profitability while experiencing a surge in growth. Prior to my experience at the cleaning company, I found this laughable — if we’re making $10,000 gross on $100,000 in revenue, surely we’d make $40,000 gross on $400,000 in revenue … right?
If you have your processes under control and able to sustain the growth you have planned, you can safely ignore this point. Our business did not, and we subsequently found ourselves struggling to keep up.
Without the appropriate processes in place, late nights and frustrated staff became the new normal. It was a disaster.
Question Four: How Competitive is the Segment We’re Looking to Expand Into?
This can be answered by running a SWOT analysis (strengths, weaknesses, opportunities and threats). It’s a dog eat dog world out there, and if you’re looking to grow your business and claim a larger piece of your market, you had better come prepared to compete.
I believe that business thrives on competition; competition doesn’t (and shouldn’t) have to be scary. Do your research and ensure you know what you’re looking to grow into.
Question Five: Should We Focus on Quick or Strategic Growth?
Where I failed in 2011 is here (really, it’s a combination of all of the above, but ultimate fault lies here). It’s easy to open the marketing floodgates and start selling, but is that the right thing to do? Can your business handle that kind of growth?
Can you handle that kind of growth?
Watching your business fall apart as you bring on thousands of dollars in new sales is extremely frustrating. It can take the wind right out of our sales (see what I did there?). Preparing for growth is essential, as once growth happens, you won’t be caught off-guard.
Your business will thank you for it, and so will your bottom line.
Photo credit: ImageFlow / Shutterstock